The Aviation Law Review: European Union

Licensing of operations

Regulation (EC) No. 1008/2008 of the European Parliament and of the Council of 24 September 2008 on common rules for the operation of air services in the Community, amended in 2019, deals with the licensing of Community air carriers, the right of Community air carriers to operate intra-Community air services and the pricing of intra-Community air services.

Undertakings established in the European Union are not permitted to provide air services unless they have received an appropriate operating licence from the competent authority of a Member State. Undertakings meeting the requirements of the Regulation are entitled to receive an operating licence. Therefore, applications from such undertakings that meet the criteria cannot be rejected.

Simplified rules apply to carriers operating smaller aircraft and no licence is required when the concerned air services are performed by non-power-driven aircraft or ultralight power-driven aircraft and for local flights.

The holder of an operating licence must comply with the following requirements at all times: (1) its principal place of business must be located in the licensing Member State; (2) it holds an air operator's certificate (AOC) granted by the same licensing Member State or the European Union Aviation Safety Agency (EASA); (3) it has one or more aircraft at its disposal operated through ownership or dry lease (meaning that the air carrier must initially and at all times operate at least one aircraft under its own AOC); (4) its main occupation is to operate air services in isolation or to combine this activity with any other commercial operation of aircraft or the repair and maintenance of aircraft; its company structure allows the competent licensing authority to control if it complies with the Regulation, notably in terms of majority ownership and effective control requirements; (5) it must be majority-owned and effectively controlled by EU Member States or nationals of EU Member States, except as provided under agreements between the European Union and third countries; (6) it meets certain financial and insurance requirements; and (7) the physical persons who will compose the management of the air carrier must be of good repute.

The financial and insurance requirements notably include the ability to demonstrate that it can meet actual and potential (financial) obligations for a period of 24 months from the start of operations and the obligation to communicate audited accounts to the licensing authority no later than six months following the last day of the respective financial year and notwithstanding Regulation (EC) No 785/2004 on insurance requirements for air carriers and aircraft operators, be insured to cover liability in case of accidents with respect to mail.

In certain circumstances, the operating licence has to be resubmitted for approval. For instance, the licence needs to be resubmitted for approval when operations have not started six months after the licence has been granted, if operations have stopped for more than six months, if the licensing authority determines that changes affecting the legal situation of the European carrier require it (such as a merger or takeover). The licensing authority may also review the status of the operating licence in the event of significant change in the financial situation of the air carrier.

In addition, the air carrier is obliged to notify its licensing authority in certain cases: when it plans to make substantial changes to its activities, of any intended merger or acquisition project or when there is a change in ownership of shares representing more than 10 per cent of the equity capital of the air carrier. Depending on the significance of the proposed change, the licensing authority may require a revised and updated business plan, decide that the licence has to be resubmitted for approval or suspend or revoke the licence, or grant a temporary licence.

Finally, the operating licence can be suspended and the air carrier prevented from continuing its operations when, in the opinion of the licensing authority, the airline cannot meet its obligations for a 12-month period, when the carrier's audited accounts have not been communicated in due time, when the carrier has knowingly or recklessly provided false information, when the AOC has been suspended or withdrawn or when the conditions of good repute are no longer met.

Ownership and effective control requirements apply to European Union air carriers and are reflected in the Regulation. It is indeed a well-established principle of EU aviation law that an operator can obtain, and maintain, an operating licence in the EU only if it has EU nationality. Article 4(f) of the Regulation provides that Member States or nationals of Member States must own more than 50 per cent of the undertaking and effectively control it, whether directly or indirectly through one or more intermediate undertakings, except as provided for in an agreement with a third country to which the EU is a party. Effective control is defined as:

a relationship constituted by rights, contract or any other means which, either separately or jointly and having regard to the considerations of fact or law involved, confer the possibility of directly or indirectly exercising a decisive influence on an undertaking, in particular by (a) the right to use all parts of the assets of an undertaking; (b) rights or contracts which confer a decisive influence on the composition, voting or decisions of the bodies of an undertaking or otherwise confer a decisive influence on the running of the business of the undertaking.

A transaction by which a non-EU carrier acquires either ownership or control or both in a Community carrier would contravene this principle and result in the loss of EU nationality and the operating licence.

The ownership requirement has been interpreted to mean that at least 50 per cent plus one share of the capital of the air carrier must be owned by Member States or nationals of Member States. However, the scale of the third-country investment, as well as the distribution of the shares within each group of shareholders, needs to be taken into account in assessing compliance with the effective control requirement. Complications may arise where it is difficult to identify the beneficial owner (and therefore the nationality of ownership) of shares, for example, through structures involving nominee shareholders on behalf of undisclosed persons. Equally, shares that do not have voting rights or otherwise different rights might be weighted differently. In practice, this difficulty can be avoided through more simple structures that clearly confer majority ownership in the EU.

As regards effective control, at issue is the question of who in practice is making a company's decisions. The Swissair/Sabena case3 established that effective control cannot be exercised jointly between EU and non-EU persons. The non-EU person or persons must not have decisive influence over the carrier. The Commission has stated that the starting point of the national licensing authority would be to assume that control would follow ownership. However, control may not be in direct proportion to ownership, for example if some shares have more votes attached to them than others, or if conditions in loan or lease agreements confer unusual powers on the lender or lessor. The licensing authority should examine the key legal documents including the statutes of the company and any shareholders' agreement and any powers of veto given to a third-country investor on matters that would normally within be within the powers of a company's board to decide.

In the Swissair case, the Commission concluded that EU nationals or Member States, individually or together with other EU nationals or Member States, must have the ultimate decision-making power in the management of the air carrier (in matters such as the appointment to the decisive corporate bodies of the carrier, the carrier's business plan, its annual budget or any major investment or cooperation projects). Further, this ability must not be substantially dependent on the support of natural or legal persons from third countries.

On 8 June 2017, the Commission adopted interpretative guidelines on the rules on Ownership and Control of EU carriers (Commission Notice C (2017) 3711 final), which supplement the information provided in the Swissair/Sabena case and in its previous Information Note of 2011, among others regarding financial links between the carrier and third-country shareholders.

The Regulation also expands and clarifies the conditions for aircraft leasing, by providing for definitions of dry-lease and wet-lease agreements, by stating that EU air carriers can freely lease aircraft as long as they continue at all times to operate at least one aircraft under their own AOC (except for safety reasons) and by imposing a prior approval of the licensing authority when at least one of the parties to a dry-lease agreement is an EU air carrier and when an EU carrier wet-leases in (as a lessee) an aircraft. More stringent conditions apply for wet-leases in an aircraft registered outside the European Union, such as the obligation for the concerned carrier to demonstrate that the leasing is necessary to satisfy exceptional or seasonal capacity needs or to overcome operational difficulties.

Subject to EU competition rules (discussed in Section IV) and any applicable safety requirements, the Regulation allows EU air carriers to combine air services and to enter into code-sharing arrangements with any other EU or third-country air carriers on intra-EU air routes as well as on air routes between Member States and third countries. Code-sharing arrangements between EU carriers and third-country air carriers on air routes between Member States and third countries may be restricted by the Member State concerned in certain circumstances.

The Regulation provides clear criteria and a specific procedure for when air routes may be covered by public service obligations: routes to an airport serving a peripheral region; routes to an airport serving a development region; or 'thin' routes to any airport. The procedure involves the initiating Member State, the other (destination) Member States concerned (if any), the European Commission, the airports concerned and the air carriers operating the route in question. The Regulation also provides for Member States to restrict access to the route in question to a single air carrier and, if needed, to compensate its losses. A number of requirements need to be fulfilled to proceed to exclusive concessions and the concession must be tendered according to the procedures set out in the Regulation. Regulation 1008/2008 was also amended by Regulation 2018/1139 (see below in further detail) to reflect that EASA has become the competent authority for oversight and issuance of air operator certificates. The amendments also aim to increase cooperation between the oversight authorities of the different authorities that can be responsible for AOC and operating licences, especially for carriers with operating bases in different Member States. Regulation 1008/2008 was furthermore amended by Regulation 2019/2 that relaxes the time limits for wet leasing as imposed by the Regulation when an international agreement with a third country is concluded, such as the Air Transport Agreement between the EU and the United States.

In 2020, in the context of the coronavirus crisis, the EU recognised that the aviation sector was facing exceptional circumstances, especially with the sharp drop in air traffic causing liquidity problems for carriers. On 25 May 2020, to support the aviation sector, Regulation 2020/696 was adopted, temporarily modifying the provisions of Regulation 1008/2008 in view of the pandemic. The Regulation suspends, until 2021, the obligation to revoke or suspend the operating licence of a carrier with financial problems caused by the pandemic; it allows Member States to refuse, limit or impose conditions on the exercise of traffic rights if it is necessary in order to address covid-19; and it includes the possibility to extend some ground handling contracts and to award them more efficiently during the crisis.

The other rules provided for under the Regulation are dealt with in other chapters in this publication.

Safety and security

Safety and security are mainly dealt with at European Union level through various regulations, which the present section will not list or review in an exhaustive manner.

Regulation (EU) 2018/1139 of 4 July 2018 on common rules in the field of civil aviation and establishing a European Union Aviation Safety Agency aims, inter alia, to establish and maintain a high uniform level of civil aviation safety in the Union. It repealed Regulation (EC) No 216/2008, the latest 'EASA basic regulation'.

It applies essentially to the design, production, maintenance and operation of aeronautical products, parts and appliances, as well as personnel and organisations involved.

The EASA, which was established and is based in Cologne, Germany, provides, among other things, technical expertise to the Commission in the preparation of the necessary legislation and assist, where appropriate, the Member States and industry in its implementation. Member States are required to comply with this legislation, but may still on some occasion have some room for manoeuvre regarding the way it is implemented and the timing for implementation. As an example, in Belgium, the rules set out in Regulation 923/2012 on Standardised European Rules of the Air have been implemented and supplemented by a national Royal Decree.

Next to the preparation of EU legislation, the EASA also publishes acceptable means of compliance (AMC) and certification specifications. Contrary to the EU legislation, each Member State may depart from the AMC if they find it necessary to fulfil their task of implementing EU law, provided they issue alternative means of compliance in line with the regulations. Where a Member State intends to develop its own means of compliance, it must notify it to the EASA if the field covered relates to air crew, air operations, aerodromes or air traffic controllers' licences. In the fields that do not fall within the scope of the EASA, Member States remain free to adopt their own set of rules. Therefore, even if the harmonisation is not totally achieved yet, many national safety rules have now been replaced by EU ones.

With the entry into force on 11 September 2018 of Regulation 2018/1139, which amended and repealed previous regulations, even more competences were transferred to EASA. The principal aim of the Regulation is to contribute to maintaining a high and uniform level of aviation safety while ensuring environmental protection. Its scope is very large and it updates many directives and regulations regarding aviation safety. It enlarges EASA's mandate (to the safety-related aspects of security and to protection of the environment) and updates legislation regarding airworthiness, crew, airports, air navigation services and air operations. Furthermore, it comprises rules for civil drones and sets out a division of tasks between the EU and national authorities of the Member States.

Alongside the certification process, the European Union has introduced, through Regulation (EC) No. 2111/2005, a list of carriers banned from operating to, from and within the European Union. This Regulation also establishes the right for passengers to be informed on the identity of the operating carrier.

Investigation and prevention of accidents and incidents in civil aviation is regulated by Regulation (EU) No. 996/2010. This Regulation aims to prevent future accidents and incidents by requiring, for each accident or serious incident, an independent safety investigation and an Investigation Report. This Investigation Report will, however, not seek to apportion blame or liability. This Regulation also aims to improve the assistance to the victims of air accidents and their relatives. In this perspective, the Regulation provides that airlines offer travellers the opportunity to give the name and contact details of a person to be contacted in the event of an accident before the name of the person on board is made publicly available. In the same context, EU carriers and third-country carriers operating flights from the EU are required to make available a list of all persons on board within the two hours following the notification of the accident. The Member States must establish a civil aviation accident emergency plan at national level. The Regulation requires them to ensure that all airlines established in their territory have a plan for the assistance to the victims of civil aviation accidents and their relatives. In addition, Directive 2003/42 amended by Regulation No. 596/2009 on occurrence reporting in civil aviation was adopted with the objective of collecting, reporting, storing, protecting and disseminating all sorts of relevant information on safety.

On 26 February 2014, the European Parliament voted on the European Commission Proposal for a 'Regulation on the reporting, analysis and follow-up of occurrences'. This Regulation is aimed at facilitating and enhancing exchange of information on aviation safety incidents between stakeholders in the aviation industry as well as between Member States, with the objective of enabling a thorough analysis and ensuring that adequate action is taken to prevent the occurrence of similar accidents. The proposed text was adopted and enacted in Regulation (EU) No. 376/2014 on the reporting, analysis and follow-up of occurrences in civil aviation, which amended Regulation (EU) No. 996/2010 and repealed Directive 2003/42.

European security legislation is voluminous. The aviation security legislation is essentially organised upon the framework of Regulation (EC) No. 300/2008 on common rules in the field of civil aviation security. This Regulation sets common rules and common basic standards on aviation security together with mechanisms for monitoring compliance. The common basic standards mainly refer to methods of screening, categories of articles that may be prohibited, access control and criteria for staff recruitment. The Regulation also provides that every Member State shall draw up, apply and maintain a national civil aviation security programme and a quality control programme. Equal requirements apply to airports and air carriers. This Regulation should be read in connection with its supplementing regulations, notably the regularly amended Regulation (EU) No. 2015/1998 laying down detailed measures for the implementation of the common basic standards on aviation security, and its implementing regulations. Note, for example, the requirements on air carriers flying cargo and mail into the EU from non-EU countries to be designated, following a strict procedure, as an 'Air Cargo or Mail Carrier operating into the Union from a Third Country Airport'. Equally, Regulation 452/2014 requires third-party operators to obtain an authorisation to be allowed to operate within, into or out of the EU.

Directive 2004/82 imposes on Member States the obligation for immigration purposes to develop a system for collecting passenger data, known as 'Advanced Passenger Information', through air carriers. This information includes the number and type of travel document used, the nationality, the full names, the date of birth, the border crossing point of entry into the territory of any of the Member States, the code of transport, the departure and arrival time of the transportation, the total number of passengers carried on that transport and the initial point of embarkation.

In 2016, Directive (EU) 2016/681 was also adopted regarding the use of passenger name record data for the prevention, detection, investigation and prosecution of terrorist offences and serious crime. This directive was required to be transposed into the national law of the Member States by 25 May 2018.

On 21 May 2020, as mandated by the Commission, the EASA and the European Centre for Disease Prevention and Control issued Operational Guidelines for the management of air passengers and aviation personnel in relation to the covid-19 pandemic, with the purpose of providing guidance to airports, airlines, national aviation authorities and other relevant stakeholders on how to facilitate the safe and gradual restoration of passenger transport, and maintain safe and secure operations whilst minimising the risk of virus transmission. The guidelines will be evaluated and updated regularly in line with the evolution of the pandemic. The recommended measures cover every stage of the passenger journey, specifying which actions need to be taken in each travel segment. Before arriving at the airport, airlines and airport managers should, for instance, inform future passengers of the travel restrictions for any person presenting symptoms. At departure airport, measures such as the limitation of access to terminals; frequent cleaning and disinfection of surfaces; and the installation of protective screens for staff members should be observed. On board the aircraft, measures should be taken to, among other things, avoid queuing, reduce on-board service, ensure proper ventilation and physical distancing to the extent possible. Finally, for the last stage, arrival, the guidelines, for instance, recommend governments to simplify border control formalities. Airports are also required to appoint a coordinator to ensure the application of the measures and airport operators, airlines and service providers should issue the necessary protective equipment to their staff members and ensure that they are trained.

Merger control

Ryanair/Aer Lingus (2007) was blocked because the Commission found that the merger would have combined the two leading airlines operating from Ireland and would have created a monopoly or a dominant position on 35 routes operated by both parties. The remedies were considered insufficient. The General Court upheld the decision.

Olympic/Aegean (2011) was blocked because the merger would have resulted in a quasi-monopoly on the Greek air transport market. Together, the two carriers controlled more than 90 per cent of the Greek domestic air transport market with no realistic prospect that a new airline of sufficient size would enter the routes to constrain the merged entity's pricing. The remedies were considered inadequate.

IAG/bmi (2012) was cleared, conditional on the release of 14 daily slots at London Heathrow to facilitate new entry and on IAG's commitment to carry connecting passengers to feed the long-haul flights of competing airlines at London Heathrow.

Ryanair/Aer Lingus (III) (2013) was blocked. The merger was found likely to harm consumers, and the remedies package, including two upfront buyers, was considered inadequate. The decision is under appeal to the General Court of the EU.

FedEx/TNT (2016) was cleared. Nevertheless, EU ownership and control rules prohibited FedEx from acquiring TNT Express's subsidiary, TNT Airways SA, which was hence sold to ASL Aviation Group prior to the acquisition of TNT Express by FedEx.

In November 2019, IAG announced that it planned to acquire the Spanish company Air Europa for around €1 billion. The process is ongoing, but there was a price adjustment mechanism because of the covid-19 situation, and the Commission has not yet approved the deal.

Competition

EU competition law applies to the aviation sector as to other sectors. The principal elements are:

  1. Article 101 of the Treaty on the Functioning of the European Union (TFEU), which prohibits anticompetitive agreements such as cartels;
  2. Article 102 TFEU, which prohibits the abuse of a dominant position;
  3. Articles 107 to 109 TFEU, which control state aid; and
  4. Regulation (EC) No. 139/2004, which creates an EU-wide system of merger control.

The regulatory framework of aviation influences how the competition rules are applied; for example:

  1. Regulation No. 1008/2008 provides that EU air carriers must be owned (by more than 50 per cent) and effectively controlled by EU Member States or nationals of Member States, directly or indirectly. This restricts the degree of foreign ownership of EU carriers and with it, the possibility of global airline consolidation; and
  2. the EU–US Open Skies Agreement, amended in 2010, significantly liberalised air traffic between those two regions, which in turn enabled competition authorities on both sides of the Atlantic to take a more lenient view of the BA/AA alliance within OneWorld.

i Article 101 TFEU and airline cartels

Airlines have been fined for cartel activity: the European Commission fined 11 carriers €799,450,000 in Airfreight; and the Commission closed its case on passenger fuel surcharge price-fixing for administrative priority.

ii Article 101 TFEU and airline alliances

The European Commission's alliance decisional practice includes:

  1. SAS and Maersk (1999): a cooperation agreement principally about code-sharing agreements and cooperation in periods of high demand led to a complaint of market sharing, which was upheld. The Commission fined the parties.
  2. OneWorld (2010): the American Airlines, Iberia and British Airways tie-up was found to be compatible with Article 101 TFEU subject to slot divestment remedies at London Heathrow or London Gatwick as well as various other remedies designed to facilitate new market entry. Since 2018, the British Competition and Markets Authority is investigating the Atlantic Joint Business Agreement (American Airlines, British Airways, Iberia and Finnair).
  3. Star Alliance (2013): Air Canada, United and Lufthansa gave 10-year slot availability commitments in relation to their revenue-sharing joint venture on the Frankfurt–New York route.

iii Abuses of dominance

Market definition

Product markets for passenger air transport are generally defined on the basis of a route described as an origin–destination pair. At its narrowest, each origin–destination pair will be a separate market. More broadly, the market may include substitute airports and other modes of transport; and it may distinguish markets by passenger type, such as time-sensitive or non-time-sensitive passengers.

Abuse of dominance: predatory pricing

There are no guidelines or case law on airline predatory pricing as these questions are essentially dealt with at national level or challenged through the non-compliance of the state aid rules.

Abuse of dominance: other airline abuses

British Midland/Aer Lingus (1992) confirmed that refusal to interline was not normal commercial practice and could be a selective and exclusionary abuse restricting the development of competition.

Virgin/British Airways (2000) established that BA's bonus schemes for travel agents were illegal exclusionary rebates that had a loyalty-inducing effect. BA was found to be a dominant buyer of travel agent services. The CJEU upheld the decision and stated that a system of discounts or bonuses that did not constitute quantity discounts, bonuses, or fidelity discount or bonuses, could be abusive if it was capable of making market entry very difficult or impossible for competitors and if it made it more difficult or impossible for co-contractors to choose between different sources of supply or commercial partners. The Court also found that the scheme was not economically justified.

Airports abuse cases

In Zaventem Airport (1995), the threshold of monthly fees needed by an airline to obtain the highest level of discount was so high that only a carrier based at Brussels Airport could benefit from the discount, placing the EU carriers at a competitive disadvantage. In Ilmailulaitos/Luftfartsverket (1999), the Finnish airports operator had abused its dominant position in awarding a 60 per cent discount on landing fees at various Finnish airports for domestic flights but not for intra-EU flights, giving domestic flights favourable treatment. Similar cases have been decided in relation to Portuguese, Spanish and Italian airports. In 2011, the Airport Charges Directive came into effect, a form of ex ante regulation requiring, inter alia, the setting of airport charges on a non-discriminatory basis.

State aid

In April 2014, the Commission published Guidelines on State Aid for Airports and Airlines, replacing the 2005 Guidelines, which gave rise to around 100 decisions while in force.

The aims of the 2014 Guidelines are to permit investment aid in cases of a genuine transport need, to allow small airports a transition period, to establish a simple framework for the start-up of new routes, to provide flexibility with regard to isolated regions and to ensure the right use of state aid.

Four reforms have been declared critical by the Commission:

  1. to allow for the transition period for operating aid, to enable unprofitable airports to gradually adjust to market change;
  2. to ensure that public support better targets cases where it is truly needed;
  3. to simplify rules for start-up aid, to start using new airports and attract airlines to fly to new destinations; and
  4. to establish a clear framework for airport–airline agreements, to ensure that they are aid-free and help to contribute to the profitability of concerned airports.

The new guidelines simplify the conditions for start-up aid. Under these new rules, airlines will be able to receive aid that covers 50 per cent of the airport charges for new destinations during a period of three years. More flexibility as regards airport size and eligible destinations can hence be justified for airports in remote regions.

On 17 May 2017, the Commission approved new state aid rules that exempt certain public support measures for airports from prior Commission scrutiny. Commission Regulation 2017/1084 introduced a new exemption from the duty to notify state aid measures to the Commission for prior approval, covering investment aid for airports below 3 million passengers. The four principal conditions to be met to benefit from the exemption are: (1) aid may not be granted to airports located in the vicinity of another airport; (2) there is a proven need that the funded infrastructure shall be used in the future and is not too large; (3) the aid does not reach beyond necessary to trigger the investment, also when calculating future revenues from the investment; and (4) the investment costs can only be subsidised for a percentage (that depends on the size and whether or not the airport is located in a remote region). Additionally, for small airports (below 200,000 passengers per year), the Regulation allows for operating aid and provides for simplified rules for investment aid.

On 12 April 2019, the CJEU ruled in Deutsche Lufthansa AG v. Commission (T-492/15) that the appeal of Lufthansa requesting the cancellation of a Commission decision finding that Ryanair had not benefited from undue advantage for its use of the Frankfurt-Hahn Airport since it paid a higher price than the extra costs of the airport. The CJEU rejected the appeal on jurisdictional grounds, concluding Lufthansa could not be admissible in challenging the relevant decision as it was not a recipient thereof and did not provide information on how the decision had a substantial effect on its market position. The CJEU ruled that Lufthansa furthermore could not challenge the decision as these national measures had not been granted in the framework of an aid scheme but rather as an individual decision and hence the ruling of the Commission was not a regulatory act. Pursuant to increasing attention on the importance of fair competition between Union carriers and third-country air carriers, Regulation 868/2004 (on protection against subsidisation and unfair pricing practices in the air transportation sector) had been introduced to protect EU carriers from certain unfair competition practices adopted by third countries or third-country carriers. It granted the European Commission the possibility to launch an investigation and impose measures in case unfair practices that favoured a third country were found. This Regulation has, however, proved ineffective and has not been applied in practice. Therefore, it has been replaced by Regulation 2019/712. The new Regulation broadens the scope of the actors who can file a complaint to the Commission (Member States, air carriers, a group of air carriers or the Commission itself), lowers the requirements for the launching of an investigation, broadens the scope of a potential investigation and aims at making the measures that can be imposed more effective. On 28 February 2020, the Commission opened an in-depth investigation and is working with the Italian authorities to assess whether Italy's €400 million loan granted to Alitalia constitutes state aid and whether it complies with the rules on state aid to companies in difficulty.

The coronavirus crisis has had an enormous financial impact on airlines and airports. In this context, the Commission issued on 20 March 2020 a Temporary Framework for State aid measures to support the economy in the COVID-19 outbreak (2020/C 91 I/01) and accepted certain measures of states in support to the aviation industry. On 31 March 2020, it found a French scheme deferring the payment by air carriers of certain aeronautical taxes to be compatible with the state aid rules. In April, it accepted the Danish and Swedish guarantee of up to approximately €137 million on a revolving credit facility in favour of Scandinavian airline SAS. On 4 May, it approved the €7-billion French aid measure to Air France consisting of a state guarantee on loans and a shareholder loan to provide urgent liquidity to the company. On 12 May 2020, it permitted an additional operating aid from Germany of €18.2 million to the small regional airport of Saarbrücke, as it suffered a significant reduction of its services as a result of the imposition of travel restrictions. Most of these measures were challenged by Ryanair.

With regard to passengers' rights and Regulation 261/2004, in its 13 May 2020 recommendation on vouchers offered to passengers and travellers as an alternative to reimbursement for cancelled package travel and transport services in the context of the covid-19 pandemic (C(2020) 3125), the Commission stated that Member States may decide whether to introduce specific schemes to provide support to airlines to ensure that reimbursement claims caused by the pandemic are satisfied and should actively consider setting up guarantee schemes for vouchers to ensure that in the event of insolvency of the issuer of the voucher, passengers or travellers are reimbursed.

Other developments

i Airport charges

On 19 May 2014, the European Commission issued its report on the application of Directive 2009/12 on airport charges (the Directive). It applies to around 70 airports in the EU and covers almost 80 per cent of passenger traffic. The Directive establishes common principles for the levying of airport charges and aims to enhance transparency of the calculation of airport charges; ensure the non-discrimination between airlines in the application of airport charges; create consultation between airlines and airports on a regular basis; and establish, in each Member State, an Independent Supervisory Authority (ISA) in charge of dispute settlement on airport charges between airports and carriers, and that will supervise the correct application of the provisions of the Directive by Member States. Member States were required to transpose the provisions of the Airport Charges Directive into national law by March 2011. The report of May 2014 analyses the application of the Airport Charges Directive by Member States.

The Commission found that several of the main objectives of the Airport Charges Directive have been achieved. Air carriers raised concerns about transparency with regards to cost and other commercial information airports were to provide, as well as the efficiency of the consultation process established by the Directive. Furthermore, air carriers have complained about the large variety of differentiation in airport charges and the compliance with the criteria of relevance, objectivity and transparency. In particular, 'incentive schemes' and discounts to new entrants and low-cost carriers were identified as controversial. The controversy of 'incentive schemes' or discounts was also raised in relation to capacity constraints and access to tailored services and dedicated terminal (parts) but then on the side of airports. On the establishment of an ISA (Articles 6 and 11), controversial issues were its role and apparent lack of independence, and the absence of a statutory deadline for airlines to submit an appeal and the suspensory effects of such appeals. The Commission has initiated infringement procedures against certain Member States on the application of the obligations the Directive establishes. The Commission will furthermore organise meetings with ISAs to discuss the enforcement of the rules. The Commission intends to revise the airport charges Directive as part of its next aviation package.

In the Deutsche Lufthansa AG case of 21 November 2019 (C-379/18), the CJEU decided that the Directive had to be interpreted as precluding the possibility for an airport managing body to determine, together with an airport user, airport charges different from those set by the airport operator and approved by the independent supervisory authority.

The Groundhandling Directive (97/67) had as a purpose the opening up of the groundhandling market at EU airports for competition. For this aim, the Groundhandling Directive wielded three main principles: liberalisation, the freedom to self-handle and the freedom of third-party handling. Exemptions to these principles are only allowed under specific conditions. The Groundhandling Directive has been evaluated for a revision and possibly the transformation into a regulation in 2002, 2009 and 2011 but this never materialised. A new evaluation was launched in February 2019.

ii Emissions Trading System

The Emissions Trading System (ETS) of the EU, through Directive 2003/87/EC, regularly amended, puts a cap on carbon dioxide emissions in relation to the aviation sector. Under this system, air carriers could buy and trade allowances to compensate their emissions pursuant to a market-based system. Whereas initially air carriers were to pay for their emissions when their point of departure or destination lay in the territory of the EU, strong opposition, threats of retaliation and trade war from third countries have caused the EU institutions to surrender to a temporary system in which only carriers operating intra-EU flights are subject to the EU ETS regime.

Following the adoption in October 2016 by the ICAO Resolution 39-3 of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), the European Union adopted in 2017 a regulation to continue the current limitation of its EU ETS to intra-EU flights and to prepare the implementation of CORSIA from 2021. Further legislation is being prepared to implement CORSIA in the EU. First, provisions are being included in three pieces of implementing and delegated legislation: a delegated act, the Commission Implementing Regulation on the monitoring and reporting of greenhouse gas emissions and the Commission Implementing Regulation on the verification of data reports and on the accreditation of verifiers. A second step will consist in making amendments to the EU ETS system by the European Parliament and the Council through the ordinary legislative procedure.

iii Unmanned aircraft systems

In its Communication (2014) 207 and in the Riga Declaration of 6 March 2015, the European Union took a step forward in its political will to regulate the use of unmanned aircraft systems (UAS), commonly known as drones. Regulation 2018/1139 of 4 July 2018 introduced essential requirements for the design, production, maintenance and operation of unmanned aircraft. The rules are intended to be proportionate to the risk of the specific (type of) operation and require that the drone is safely controllable and manoeuvrable. According to the Regulation, drones should be so designed as to fit their function and intended type of operation, respect privacy and the protection of personal data. Drones should furthermore be identifiable, also as to their nature and purpose of their operations.

On 24 May 2019, the Commission adopted an Implementing Regulation on the operation of unmanned aircraft (2019/947). It principally lays down obligations for Member States with regard to the certification, registration of unmanned aircraft as well as the establishment of geographical zones where UAS operations are restricted or excluded.

iv Package Travel Directive

The old Package Travel Directive (Directive 90/314/EEC) has been recast in a new directive (Directive 2015/2302). Member States were required to transpose it into their national legislation by 1 January 2018.

v Brexit

On 31 January 2020, the UK left the European Union. A transition period has been established until 31 December 2020, during which the EU–UK relationship on aviation has to be determined. During the transition period, EU law, including aviation law, will continue to apply to the UK. Hence, until the end of the year, Britain remains in the European Common Aviation Area (ECAA), it will continue to participate in EASA, UK operating licences remain valid in the EU, and the UK remains a party to the air service agreements between the EU and third country.

Footnotes

1 Dimitri de Bournonville is a partner and Joanna Langlade is an associate at Kennedys Brussels LLP. The authors would like to acknowledge the contribution of Charlotte Thijssen, Jeremy Robinson and Cyril-Igor Grigorieff, who co-wrote the chapter in previous editions and upon which this chapter is based.

2 2001/539/EC: Council Decision of 5 April 2001 on the conclusion by the European Community of the Convention for the Unification of Certain Rules for International Carriage by Air (the Montreal Convention).

3 It was assessed under a previous version of the nationality rule in Commission Decision of 19 July 1995 on a procedure relating to the application of Council Regulation (EEC) No. 2407/92 (Swissair/Sabena). At the same time it was assessed by the European Commission under the old merger control rules in Case No. IV/M. 616 – Swissair/Sabena under Regulation (EEC) No. 4064/89 on 20 July 1995.

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